European public finance at risk from climate damages

European countries are facing increasing pressure on their public finances due to the rising frequency of climate disasters such as floods, wildfires, and droughts, which have caused economic losses estimated at around 822 billion euros since 1980. However, less than 25% of these losses are covered by insurance. Repeated catastrophes are putting strain on budgets, as insurance coverage becomes less adequate and the need for reconstruction grows—especially since Europe is among the fastest regions globally to experience rising temperatures. Studies encourage early investment in climate adaptation to reduce future costs, but governments face a difficult dilemma: whether to spend now on adaptation or to bear even greater burdens in the future as inflation increases. This is particularly pressing given that a significant portion of the losses will ultimately be borne by taxpayers if insurance coverage and risk management are not improved effectively.

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